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Nigerian Oil: A Blessing or Curse?

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Nigeria Oil

The Nigerian economic crisis is getting deeper and there seems to be no succinct plans in sight to curb the continuous degradation of the economy. Nigeria is one of the largest crude oil producing nations and 90 percent of its foreign exchange earnings are generated from crude oil sales.

In June 2008, crude oil peaked at $147.42 a barrel, the highest in the history of the world. Nigerian foreign reserve likewise grew from $45 billion to $63 billion in September 2008 before the global economic situation hit the embattled nation in November 2008, when oil price dropped to $32.40 a barrel.

The problems of Nigeria’s economy was further compounded when U.S oil production increased, and therefore stopped importation from Nigeria in 2014. In December 2014, India (who had replaced the U.S) also reduced its importation by 38 percent to 5.3 million barrels — from 13.7 million in October and 12.4 million in November. China did not import a single barrel for the said month after initially reducing its importation by 50.3 percent.

There were several effects on the economy of Nigeria (home to over 170 million people) for two reasons: firstly, Nigeria only had contractual agreements with a few countries and as such sell on “spot”, two, the country overly depends on crude oil to finance capital expenditures and with crude oil price currently $48.08 a barrel from last year’s peak of $107.64 on June 13th.  The question is how would Nigeria avert her economy rout with falling oil price?

Since the drop in oil price globally, the Central Bank of Nigeria (CBN) has adjusted its exchange rate five times, even after the introduction of tight forex controls in February; the latest was on Thursday July 23rd, ahead of Monetary Policy Committee (MPC) meeting. The currency exchange rate is presently 197 to the United States dollar and CBN promised it would be sold to customers through interbank at 198. It’s a different story at the parallel market where Naira is 244 to a U.S dollar.

Nigeria real

Data partly gotten from National Bureau of Statistics (NBS) Economic Review and Outlook Report.

In the past months, over 20 states has reportedly  failed to pay their worker’s salary, a situation termed a disgrace by the president Muhammadu Buhari who was forced to devise a bailout of $3.4 billion to offset the deficit of the affected states — in an effort to curtail further civil actions from civil servants.

The Nigeria GDP rose to $594.3 billion for the first time in 2014 and became the biggest economy in the whole of Africa.  According to report from National Bureau of Statistics (NBS), the service sector contributed the most, 42.6 percent to the total GDP, while industry was 25.6 percent, agriculture and oil sectors made up 20.6 and 11.2 percent respectively. The report shows that service is the fastest growing sector followed by industrial sector. The agricultural sector growth rate has been hindered by lack of finance and limited skilled labour — many preferring to work in the lucrative oil sector of the country.

The economy has been impeded by lack of a diversification strategy that could leverage its vast resources and man-power for growth. Excessive focus on crude oil has created a one way foreign revenue channel, that any slight fluctuation in global oil price (beyond Nigeria’s control) impacts the entire nation. It is obvious that Nigeria cannot continue to depend on oil for growth. The NBS report has shown that oil growth was only 6.3 percent and contributed only 11.2 percent to the entire GDP —the lowest among the sectors. The truth is Nigeria is currently surviving on sectors with less focused attention, but one wonder why due diligence is not done to elevate those sectors in order to create a permanent solution to oil’s unpredictable nature?

 

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Merger and Acquisition

Shell to Sell $9.5bn Permian Asset to ConocoPhillips After Announcing Nigeria Onshore Exit

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Shell

Royal Dutch Shell is set to sell its Permian Basin assets to ConocoPhillips for $9.5 billion in cash, an exit from the largest United States oilfield for the energy major, which is now shifting its focus to the clean energy transition.

Earlier in the year, the company likewise said it was launching a major divestment of its Nigerian assets, especially those in the shallow-water and onshore, in a deal which could be one of the hugest in the oil and gas industry in Africa ever.

The Minister of State, Petroleum Resources, Chief Timipre Sylva and Shell officials have confirmed that talks have been ongoing, although a recent report announced that some glitches were holding up the discussions.
The Nigerian National Petroleum Corporation (NNPC), a major party to the ongoing talks, last month pledged to protect the interest of Nigeria in any transaction involving international oil companies, including shell, if they are interested in divesting from the country.

Group Managing Director of the corporation, Mallam Mele Kyari, said that although the NNPC cannot stop any of the oil concerns from deciding to sell off any of their assets, but the rules must be strictly followed.
Against the backdrop of plans by Shell to fully sell off its subsidiary, Shell Petroleum Development Company (SPDC) “because the company’s future plans no longer align with the operations of the Nigerian subsidiary” the NNPC boss noted that having learnt from previous experiences.

He noted that the corporation was developing requisite divestment policies that will provide clear guidelines and criteria for exiting of partners’ interest in all its Joint Venture (JV) and Production Sharing Contracts (PSC) arrangements.

Kyari stated that Nigeria will leverage on its rights of pre-emption as well as evaluating the operational competency and track records of new partners, adding that the corporation will pay particular attention to abandonment and relinquishment costs; severance of operator staff; third party contract liabilities; and competency of the buyer as well as post purchase competence in technical, operational, and financial issues.

In May, Shell’s Chief Executive Officer, Ben van Beurden, while speaking at the company’s annual general meeting, said that Shell could no longer afford to be exposed to the risk of theft and sabotage.

But for ConocoPhillips, it is the second sizable acquisition in a year in the heart of the U.S. shale industry, as American and European producers diverge in whether to focus on hydrocarbons going forward.
Like all of the world’s largest oil companies, Shell is under pressure from investors to reduce fossil-fuel investments to help reduce global carbon emissions and fight climate change.

Shell and BP Plc have set targets to slowly move away from crude production while investing in non-fossil energy sources like solar and wind power, while U.S. producers including Exxon Mobil and Chevron are doubling down on hydrocarbons.

Through the deal, ConocoPhillips sides with the latter, but concurrently announced it would tighten its targets for cutting greenhouse gas emissions, an acknowledgement of heightened focus on climate considerations.

ConocoPhillips is acquiring around 225,000 net acres, as well as over 600 miles of associated infrastructure, according to its statement announcing the transaction. This builds on its existing portfolio of 750,000 net acres in the Permian.

U.S. shale producers have used mergers and acquisitions to boost their size to compete against the largest operators and lower production costs through economies of scale.

To help pay for the deal, ConocoPhillips will hike its own divestment targets by 2023 to between $4 billion and $5 billion, up from between $2 billion and $3 billion.

For Shell, selling the Permian assets will leave its U.S. oil and gas production almost entirely in the offshore Gulf of Mexico, where it is the largest single producer. It sold its Appalachian gas assets last year.

Shell will return $7 billion of the proceeds to shareholders as dividends on top of existing commitments, with the rest going to pay down debt, it said. Conoco also announced it would increase quarterly cash payments to shareholders by 7 per cent from December 1, according to a Reuters report.

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Appointments

deVere Appoints First Chief Diversity Officer

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deVere Group - Investors King

deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organisations, has appointed Beverley Yeomans as its inaugural Chief Diversity Officer (CDO).

Based in Malta, Ms Yeomans, who is also the Chief Operating Officer for the game-changing group, takes up the additional role with immediate effect and reports directly to the founder and CEO, Nigel Green.

Mr Green comments: “deVere is committed to making our globe-spanning organisation even more inclusive, diverse and equitable. To ensure that this critical commitment is successful, we needed someone who knows our culture inside out to lead the charge.

“Beverley has been at the top of her game in a senior executive role and on the Board, for some 22 years in a highly male-dominated sector.  Due to traditional industry biases, it’s a depressing reality that very few women have ever achieved this level, so young, and for this long in international financial services.

“But Beverley tore-up that ‘rule book’, breaking down barriers and leading by example. She was the ideal person to become our first-ever Chief Diversity Officer.”

For her part, Ms Yeomans says: “I’m thrilled to be taking on this extra role and help our group further incorporate diversity and inclusion in the way we operate day-to-day, as well as attracting and retaining the very best diverse talent.

“I’m excited to get going on building on the strong foundations we have already created at deVere, helping to galvanise the culture of inclusion.”

deVere has the most diverse and inclusive staff in the international financial services sector.  This is in no small part due to the tireless work and expertise of Beverley Yeomans.

“But there’s much, much more to do,” she says. “We will continue to lead the drive. Why? Because it is the right, fair thing to do and it makes for a better and stronger organisation.”

Ms Yeomans goes on to say: “I look forward to launching bold, innovative ideas and being a catalyst for promoting an even more inclusive work environment where all our people belong and thrive.”

Nigel Green concludes: “deVere isn’t an organisation that pays lip service to diversity. We’re taking measurable action.”

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Appointments

MarketForce Appoints FMCG Distribution Veteran Arthur Bourekas as Chief Commercial Officer

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Marketforce - Investors King

MarketForce, the Kenya and Nigeria-based B2B platform for retail distribution of consumer goods and digital financial services in Africa, is pleased to announce the appointment of Arthur Bourekas as the Chief Commercial Officer, effective 1st October 2021.

Mr. Arthur has over 25 years of experience executing commercial growth, logistics and distribution in some of the most challenging countries in the world. He worked for A.G. Leventis (Nigeria) PLC and PZ cussons in Nigeria, Indonesia, Malaysia and Australia. He is a veteran FMCG distribution expert in Africa, where he has spent over 17 years supporting conglomerates listed on the NSE to conquer African markets, including running an affiliate company supporting Coca-Cola Hellenic in Nigeria (one of the largest Coca-Cola bottling companies in the world).

Most recently, Arthur was involved –  at a very senior level – with Alerzo, a Nigerian B2B retail-tech startup that also helps retailers stock inventory directly from manufacturers.

“FMCG distribution in Africa is yet to be done effectively. Even multinationals with years of experience often can optimize their distribution and add real sales growth to their business. Innovation and focus is key! I am confident that with the platform MarketForce has built so far, along with the expertise being built within the organisation, we are destined to revolutionise the sector and become a formidable force.” – Arthur Bourekas, New Chief Commercial Officer of MarketForce.

Running sales operations, logistics and distribution in the most populous countries in both South East Asia and Africa brings to MarketForce a multitude of partnerships, commercial, logistics and distribution skill sets. These countries have thousands of islands, regional geo-political complexities and a combined 500M people – the kind of experience that matches MarketForce’s ambitions to be the largest B2B retail distribution company in sub-saharan Africa.

“Arthur aligns to our ambitious growth plans and brings significant expertise into this new, critical role for MarketForce as we empower informal merchants to maximise their profits and grow in a digital age. His extensive emerging market experience, ability to drive commercial growth, and depth of technical distribution knowledge in Nigeria will be valuable in our efforts to deepen our East Africa market reach while expanding into the West African market.” – Tesh Mbaabu, Co-Founder and CEO of MarketForce.

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